Some designs don’t lean on vaults or treasuries. They lean on rules. Price wanders; supply moves; the system tries to steer $1 with incentives instead of reserves. When it works, it feels elegant—no banks, no bonds, just policy. When it stumbles, you learn that policy without buyers is choreography without dancers.
Picture the room.
No custodians. No PDFs. A policy engine sits at the center like a thermostat. If the market prints above $1, it opens the vents and expands supply—fresh tokens to LPs, stakers, market participants who sell them back toward par. If the market prints below $1, it contracts supply: pays you to burn now for more later (coupons/bonds), or buys back and retires tokens using protocol fees or a treasury if one exists. The promise is balance through elasticity.
Follow one loop slowly.
Price ticks to $1.02. The engine mints a trickle of new tokens and routes them to people who will sell into that premium. The spread thins, traders pocket a basis, the chart settles. Orderly, almost boring—because expansion is cheap when confidence is thick.
Now the other side. Price slides to $0.99. The engine offers a bond: give up 1 coin today, receive >1 later—if the system re-enters expansion. That “if” is the whole story. When demand is present, the loop is self-healing: people accept the IOU, supply shrinks, price lifts, bonds pay out in the next sunny stretch. When demand thins, the IOU feels like a dare. Fewer takers means deeper discounts; deeper discounts advertise future dilution; the market front-runs that math by selling now. Reflex shows up in a simple loop: less demand → bigger promises → even less demand. If no funded backstop (fees/treasury) buys the dip, the thermostat keeps turning while the room keeps cooling.
Carry this